Supreme Court clarifies the test for determining whether collective proceedings should be brought on an opt-out basis

In a landmark judgment in the UK's collective proceedings regime, Evans (Respondent) v Barclays Bank Plc and others (Appellants), the Supreme Court has confirmed the test for determining whether to certify on an opt-out basis. 

The ruling emphasises the breadth of discretion afforded to the UK’s specialist competition tribunal in exercising its ‘gatekeeper’ function (including in analysing the strength of the case) for this purpose, as well as the need to balance the regime’s aim of facilitating the vindication of claimants’ rights against the particular burden that opt-out proceedings place on defendants.

In this article, we set out the background and the key findings in the judgment. Macfarlanes acted for NatWest Markets, one of the proposed defendants and successful appellants.

Background

In 2019, Mr Phillip Evans applied to the Competition Appeal Tribunal (the Tribunal) to combine in opt-out collective proceedings claims against several global banks arising out of the European Commission’s May 2019 settlement decisions regarding the G10 spot FX market (known as the Three Way Banana Split Decision and the Essex Express Decision, after the names of online chat rooms in which certain FX traders exchanged information). A similar application had also been made by Michael O’Higgins FX Class Representative Limited, although ultimately the Tribunal preferred that of Mr Evans.

Mr Evans sought to represent classes of claimants who entered into transactions not only with the relevant banks but also with other financial institutions or in the inter-dealer market. These claimants included sophisticated financial institutions and other large commercial entities (who were alleged to have suffered significant losses), as well as a large number of individuals and smaller entities (who were alleged to have suffered only a very small amount of loss).

The banks contended that Mr Evans’ claim should only be certified (if at all) on an opt-in basis, in particular by reference to the two factors set out at Rule 79(3) of the CAT Rules, namely: 

1. the strength of the claims; and 

2. the practicability of opt-in proceedings.

In its judgment of 31 March 2022, the Tribunal agreed with the banks, and so refused Mr Evans’ application for certification on an opt-out basis. However, following Mr Evans’ appeal, the Court of Appeal overturned the Tribunal’s judgment in 2023. In so doing, the Court of Appeal placed significant weight on the European Commission’s findings in a separate infringement decision against a non-defendant bank which post-dated the Tribunal’s judgment (the Sterling Lads Decision).

The banks appealed to the Supreme Court.

Findings

By unanimous judgment, the Supreme Court allowed the banks’ appeals on all four grounds. The key findings were as follows.

Issue 1: the assessment of the strength of the claims for the purpose of the ‘opt-in versus opt-out’ issue ([73]-[111])

The Supreme Court determined that the Tribunal’s conclusion that Mr Evans’ claim was weak (and in particular that no plausible case on causation had been articulated) was “fully and convincingly reasoned”, and “there was no ground on which the Court of Appeal was justified in interfering with it” [111]. Likewise, this conclusion was found to have been “properly regarded by the Tribunal as a factor weighing strongly against opt-out proceedings” [168(i)].

In reaching this determination, the Supreme Court found the following.

• The ‘strength of the claims’ factor under CAT Rule 79(3)(a) when determining the ‘opt-in versus opt-out’ issue is “not a neutral factor” [168(i)]. Instead it agreed with the Tribunal that, as a general rule, “the weaker a case, the less justification there is for certifying on an opt-out basis” [96]. Put the other way round, “the stronger the claim, the greater confidence the Tribunal can reasonably feel that certifying an opt-out claim will achieve a just outcome (eg by way of settlement) notwithstanding the additional burden imposed on the defendant” [99].

• It is open to the Tribunal to conclude that although a claim passes the strike-out or summary judgment threshold, it is nevertheless very weak [102].

• It is not open to an appellate court to engage in its own assessment of the merits in circumstances where the Tribunal’s approach discloses no error of law [109].

Issue 2: the assessment of practicability of opt-in proceedings for the purpose of the ‘opt-in versus opt-out’ issue ([112]-[136])

Similarly, the Supreme Court determined that the Tribunal was entitled to conclude that opt-in proceedings were practicable in this case on the basis that it did, namely that: 

1. even though Mr Evans’ evidence was that opt-in proceedings would not in fact be brought, this was because “a significant number of large and sophisticated financial institutions which stood to recover substantial sums of money if the claim succeeded were not interested in opting in”; and in those circumstances, 

2. although it was not practicable for smaller entities or individuals to opt in, the issue of practicability needed to be looked at in the round across the class [168(ii)].

In reaching this determination, the Supreme Court found the following.

• The ‘practicability of opt-in’ factor under CAT Rule 79(3)(b) means that “if it is practicable for the proceedings to be brought as opt-in proceedings, then generally speaking they should be” [112].

• The Tribunal has “wide case-management powers of evaluation and discretion” in considering this factor and more broadly in determining the ‘opt-in versus opt-out’ issue [114].

• The Tribunal was right not to treat the assertion that the claim would collapse if certified as opt-in as a “trump card” in favour of opt-out [110].

• It is not open to an appellate court to substitute its own evaluation of the evidence on practicability for that of the Tribunal in circumstances where the Tribunal’s approach discloses no error of law [133]-[134].

Issue 3: relevance of the principles of facilitating vindication of rights and deterrence of future wrongdoers to the ‘opt-in versus opt-out’ issue ([137]-[141])

The Supreme Court overturned the Court of Appeal’s conclusion that the policy of facilitating the vindication of rights and deterring future wrongdoers was a strong factor pointing in favour of opt-out over opt-in [168(iii)].

Instead, the Supreme Court found that the Tribunal is required to strike a balance between competing policy goals: “assisting claimants to obtain redress” on the one hand (pointing in favour of opt-out), and “protecting defendants from oppressive litigation” on the other hand (pointing in favour of opt-in). The “starting point is one of neutrality” [138].

In reaching this determination, the Supreme Court noted:

• “access to justice is something to which both claimants and defendants are entitled” [140], and, in any event,

• “[i]f clearly unmeritorious claims are allowed to proceed on an opt-out basis which involves an unjustified leverage advantage for claimants…, the result will not be due enforcement of the competition rules but over-enforcement, contrary to the public interest” [141].

Issue 4: the admissibility of the Sterling Lads Decision ([142]-[167])

The Supreme Court found that the Sterling Lads Decision was inadmissible against the banks [168(iv)].

In reaching this determination, the Supreme Court found the following.

• The Tribunal is bound by the common law rule in Hollington v Hewthorn that findings of other decision-makers (e.g. regulators) are not admissible in subsequent proceedings as evidence of the facts found [152].

• Indeed, this rule applied here “in its strong form”, since the defendants were not parties to the earlier process and therefore had no opportunity to influence those findings by adducing evidence or advancing arguments [153].

• Although the Sterling Lads Decision could in principle be admissible for the narrow interlocutory purpose of assisting in identifying evidence that might be relevant to the claims arising out of the Three Way Banana Split and Essex Express Decisions, in fact the Sterling Lads Decision did not provide any such assistance here [158]-[160].

Concluding comments

This is perhaps the most significant judgment for the UK’s collective proceedings regime since the Supreme Court ruled on the test for certification of collective proceedings more broadly in Merricks v Mastercard Inc [2020] UKSC 51 (read our article here). The Tribunal has been sanctioned to conduct a robust merits analysis in order to assess whether opt-out proceedings are appropriate. Where the Tribunal is faced with a ‘hybrid’ class (in terms of claimant size and/or claim value), the Tribunal will need to consider the position in the round, including the basis on which larger or more sophisticated proposed class members may not be willing to bring their own claim or participate in opt-in proceedings. This latter point in particular marks a departure from previous Court of Appeal authority from the Evans case and Le Patourel v BT, as since applied by the Tribunal in cases such as Spottiswoode v Airwave Solutions Ltd (read our article here).

Similarly, the Supreme Court’s findings on the admissibility of prior judicial or regulatory findings may have far-reaching consequences, including for cases on which there has already been a first instance certification decision or trial judgment. One such example is Kent v Apple (read our article here), the first damages award under the collective proceedings regime, in which the Tribunal accorded a “high degree of respect” to a prior CMA market study (notwithstanding that this was not an infringement decision in the context of which Apple could have exercised procedural rights) and European Commission decision (notwithstanding that this was on appeal).  Apple has applied to the Court of Appeal for permission to appeal.